PR Newswire | Oct 29, 2020 07:02AM EDT

30, 2020

10/29 06:00 CDT

MDC Partners Inc. Reports Results For The Three And Nine Months Ended September 30, 2020 NEW YORK, Oct. 29, 2020

Company Delivers 9% Sequential Revenue Growth,Strategic Plan Implementation Results in Solid Q3 & YTD Results

NEW YORK, Oct. 29, 2020 /PRNewswire/ --

THIRD QUARTER & YTD HIGHLIGHTS:

* Revenue of $283.4 million in the third quarter versus $342.9 million in the prior period, a decline of 17.3%; and $870.8 million YTD versus $1,033.8 million in the prior year period, a decline of 15.8%. * Sequential revenue growth of 9.1% from the second quarter of 2020. * Organic revenue declined 16.4% in the third quarter and 14.1% YTD. * Net income attributable to MDC Partners common shareholders was $0.4 million in the third quarter of 2020 versus net loss of $5.1 million a year ago. * Net loss attributable to MDC Partners common shareholders was $6.0 million in the nine months ended September 30, 2020 versus $6.5 million a year ago. * Adjusted EBITDA for the three months ended September 30, 2020 was $54.1 million versus $49.2 million a year ago, an increase of 9.9%. Adjusted EBITDA Margin of 19.1%, compared to 14.3% in the prior year quarter. * Sequential Adjusted EBITDA growth of 49.5% from the second quarter of 2020, increasing from $36.2 million to $54.1 million. * Adjusted EBITDA for the nine months ended September 30, 2020 was $129.8 million versus $117.1 million a year ago, an increase of 10.8%. Adjusted EBITDA Margin of 14.9%, compared to 11.3% a year ago. * Excluding the sales of Kingsdale and Sloane, Adjusted EBITDA increased 12.1% in the third quarter and increased 15.2% in the nine months of 2020 compared with the prior year period. * Covenant EBITDA (LTM) of $199.3 million versus $175.5 million at September 30, 2019, an increase of 13.6%. * Net New Business wins totaled $31.9 million in the third quarter, and $60.8 million in the nine months ended September 30, 2020.

(NASDAQ: MDCA) - MDC Partners Inc. ("MDC Partners" or the "Company") today announced financial results for the three and nine months ended September 30, 2020.

"MDC Partners delivered strong results this quarter in the face of the significant but reduced drag of the COVID-19 pandemic. We delivered 9 percent sequential revenue growth and 49 percent sequential Adjusted EBITDA growth from the second quarter of 2020, along with $32 million in net new business in the quarter," said Mark Penn, Chairman and Chief Executive Officer of MDC Partners.

"We continue to implement and make progress on our strategic plan that has brought our partners together into newly formed networks and collaborative holding company pitches. We launched our first major digital marketing product, and expanded profitability and margins as we continued to centralize back-office operations and consolidate real estate," added Mr. Penn.

Frank Lanuto, Chief Financial Officer, added, "Our cost management measures resulted in higher year-over year Adjusted EBITDA in both the third quarter and year-to-date, with third quarter margins expanding to 19.1%. We ended the quarter with $37 million in cash and no borrowings on our revolver, lowering our leverage to 4.4x from 5.0x a year ago."

Lead Independent Director and Special Committee Chairman Irwin Simon commented, "Having reached an agreement in principle on certain key aspects of the proposed merger with The Stagwell Group, the special committee, working closely with its independent advisors, continues to proceed diligently towards an outcome that will maximize value to our shareholders."

The agreement in principle is non-binding and subject to several conditions, including obtaining relevant third-party consents to the potential transaction (in certain cases prior to entering into definitive documentation). No assurances can be given regarding the likelihood of obtaining such consents, of reaching agreement on definitive documentation, or of ultimately completing the potential transaction.

Third Quarter and Year-to-Date 2020 Financial Results

Revenue for the third quarter of 2020 was $283.4 million versus $342.9 million for the third quarter of 2019, a decline of 17.3%. The effect on revenue of foreign exchange was positive 0.3%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.2%, and organic revenue decline was 16.4%, inclusive of $11.8 million or 121 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Revenue increased 9.1% sequentially from the second quarter of 2020 as client spending activity increased following the initial decline in the second quarter due to COVID-19. Net New Business wins in the third quarter of 2020 totaled $31.9 million.

Net income attributable to MDC Partners common shareholders for the third quarter of 2020 was $0.4 million versus net loss of $5.1 million for the third quarter of 2019. The increase was primarily due to lower revenues, more than offset by a reduction in expenses, as well as the favorable impact of foreign exchange. Diluted income per share attributable to MDC Partners common shareholders for the third quarter of 2020 was $0.00 versus diluted loss per share of $0.07 for the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 was $54.1 million versus $49.2 million for the third quarter of 2019, an increase of 9.9%, primarily due to reduced expenses. This led to a 480 basis point increase in Adjusted EBITDA margin in the third quarter of 2020 to 19.1% from 14.3% in the third quarter of 2019.

Covenant EBITDA for the last twelve months (LTM) was $199.3 million as of September 30, 2020 versus $175.5 million at September 30, 2019, an increase of 13.6%. The change was primarily driven by the increase in Adjusted EBITDA.

Revenue for the first nine months of 2020 was $870.8 million versus $1,033.8 million for the first nine months of 2019, a decline of 15.8%. The effect on revenue of foreign exchange due to the strong US Dollar was negative 0.4%, the impact of non-GAAP acquisitions (dispositions), net was negative 1.3%, and organic revenue decline was 14.1%, inclusive of $39.9 million or 198 basis points from lower billable costs. Organic revenue declined primarily due to reduced spending by clients in connection with COVID-19. Net New Business wins for the first nine months of 2020 totaled $60.8 million.

Net loss attributable to MDC Partners common shareholders for the first nine months of 2020 was $6.0 million versus $6.5 million for the first nine months of 2019. Diluted loss per share attributable to MDC Partners common shareholders for the nine months of 2020 was $0.08 versus diluted loss per share of $0.10 for the first nine months of 2019.

Adjusted EBITDA for the first nine months of 2020 was $129.8 million versus $117.1 million for the first nine months of 2019, an increase of 10.8%. The improvement was primarily due to a reduction in expenses to combat the impact of COVID-19 on the business, partially offset by lower revenues. This led to a 360 basis point improvement in Adjusted EBITDA margin in the first nine months of 2020 to 14.9% from 11.3% in the first nine months of 2019.

Financial Outlook

Given the uncertainties in the global business environment arising from the COVID-19 pandemic, the Company is not providing a 2020 outlook for Revenue and Covenant EBITDA at this time.

Conference Call

Management will host a conference call on Thursday, October 29, 2020, at 8:30 a.m. (ET) to discuss its results. The conference call will be accessible by dialing 1-862-298-0702 or toll free 1-888-437-3179. An investor presentation has been posted on our website at www.mdc-partners.com and may be referred to during the conference call.

A recording of the conference call will be accessible within one business day after the conference call until 12:00 a.m. (ET), November 5, 2020, by dialing 1-754-333-7735 or toll free 1-888-539-4649 (passcode 153920), or by visiting our website at www.mdc-partners.com.

About MDC Partners Inc.

MDC Partners is one of the most influential marketing and communications networks in the world. As "The Place Where Great Talent Lives," MDC Partners is celebrated for its innovative advertising, public relations, branding, digital, social and event marketing agency partners, which are responsible for some of the most memorable and effective campaigns for the world's most respected brands. By leveraging technology, data analytics, insights and strategic consulting solutions, MDC Partners drives creative excellence, business growth and measurable return on marketing investment for over 1,700 clients worldwide. For more information about MDC Partners and its partner firms, visit our website at www.mdc-partners.com and follow us on Twitter at http://www.twitter.com/mdcpartners.

Non-GAAP Financial Measures

In addition to its reported results, MDC Partners has included in this earnings release certain financial results that the Securities and Exchange Commission (SEC) defines as "non-GAAP Financial Measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. Such non-GAAP financial measures include the following:

(1) Organic Revenue: "Organic revenue growth" and "organic revenue decline" refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) "non-GAAP acquisitions (dispositions), net". Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

(2) Net New Business: Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period.

(3) Adjusted EBITDA: Adjusted EBITDA is a non-GAAP financial measure that represents Net income (loss) attributable to MDC Partners Inc. common shareholders plus or minus adjustments to operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, and other items, net which includes items such as severance expense and other restructuring expenses, including costs for leases that will either be terminated or sublet in connection with the centralization of our New York real estate portfolio.

(4) Covenant EBITDA: Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one-time charges, permitted dispositions and other items, as defined in the Company's Credit Agreement. We believe that the presentation of Covenant EBITDA is useful to investors as it eliminates the effect of certain non-cash and other items not necessarily indicative of a company's underlying operating performance. In addition, the presentation of Covenant EBITDA provides additional information to investors about the calculation of, and compliance with, certain financial covenants in the Company's Credit Agreement.

Included in this earnings release are tables reconciling MDC Partners' reported results to arrive at certain of these non-GAAP financial measures.

This press release contains forward-looking statements. Statements in this press release that are not historical facts, including without limitation the information under the heading "Financial Outlook" and statements about the Company's beliefs and expectations, earnings (loss) guidance, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Words such as "estimates", "expects", "contemplates", "will", "anticipates", "projects", "plans", "intends", "believes", "forecasts", "may", "should", and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

* risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients, including as a result of the novel coronavirus pandemic ("COVID-19"); * the effects of the outbreak of COVID-19, including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties; * developments involving the proposal by Stagwell Media LP to enter into a business combination with the Company (the "Potential Transaction"), including the impact of the announcement of the formation of the special committee, the reaching of an agreement in principle on certain aspects of a Potential Transaction, and the continuing discussion and review of a Potential Transaction on the Company's business, whether any Potential Transaction will occur, and/or the ability to implement any Potential Transaction or other transaction; * the Company's ability to attract new clients and retain existing clients; * reduction in client spending and changes in client advertising, marketing and corporate communications requirements; * financial failure of the Company's clients; * the Company's ability to retain and attract key employees; * the Company's ability to achieve the full amount of its stated cost saving initiatives; * the Company's implementation of strategic initiatives; * the Company's ability to remain in compliance with its debt agreements and the Company's ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration; * the successful completion and integration of acquisitions which complement and expand the Company's business capabilities; and * foreign currency fluctuations.

Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in the Company's 2019 Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on March 5, 2020 and accessible on the SEC's website at www.sec.gov., under the caption "Risk Factors," and in the Company's other SEC filings.

SCHEDULE 1 MDC PARTNERS INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (US$ in 000s, Except per Share Amounts)



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Services $ 283,423$ 342,907$ 870,843$1,033,828

Operating Expenses:

Cost of services sold 172,531 222,448 560,856 700,351

Office and general expenses 72,512 79,726 205,075 234,120

Depreciation and amortization 9,332 9,368 27,437 28,869

Impairment and other losses 159 1,944 19,159 1,944

254,534 313,486 812,527 965,284

Operating income 28,889 29,421 58,316 68,544

Other Income (Expenses):

Interest expense and finance charges, net (15,266) (16,110) (46,819) (49,284)

Foreign exchange gain (loss) 2,159 (3,973) (7,256) 4,401

Other, net 505 (431) 22,723 (4,559)

(12,602) (20,514) (31,352) (49,442)

Income before income taxes and equity in earnings of non- 16,287 8,907 26,964 19,102 consolidated affiliates

Income tax expense 1,452 3,457 7,029 6,292

Income before equity in earnings of non-consolidated affiliates14,835 5,450 19,935 12,810

Equity in earnings (losses) of non-consolidated affiliates (31) 63 (829) 352

Net income 14,804 5,513 19,106 13,162

Net income attributable to the noncontrolling interest (10,728) (7,265) (14,620) (10,737)

Net income (loss) attributable to MDC Partners Inc. 4,076 (1,752) 4,486 2,425

Accretion on and net income allocated to convertible preference(3,716) (3,306) (10,528) (8,931) shares

Net income (loss) attributable to MDC Partners Inc. common $ 360 $ (5,058)$ (6,042)$(6,506) shareholders

Income (loss) Per Common Share:

Basic

Net income (loss) attributable to MDC Partners Inc. common $ 0.00 $ (0.07) $ (0.08) $(0.10) shareholders

Diluted

Net income (loss) attributable to MDC Partners Inc. common $ 0.00 $ (0.07) $ (0.08) $(0.10) shareholders

Weighted Average Number of Common Shares Outstanding:

Basic 73,207,61972,044,48072,713,25768,154,306

Diluted 73,476,77972,044,48072,713,25768,154,306

SCHEDULE 2 MDC PARTNERS INC. UNAUDITED REVENUE RECONCILIATION (US$ in 000s, except percentages)



Three Months Ended Nine Months Ended

Revenue $ % Change Revenue $ % Change

September 30, 2019 $342,907 $ 1,033,828

Organic revenue ^(1) (56,281) (16.4) %(145,285) (14.1) %

Non-GAAP acquisitions (dispositions), net(4,076) (1.2) %(13,865) (1.3) %

Foreign exchange impact 873 0.3 %(3,835) (0.4) %

Total change (59,484) (17.3) %(162,985) (15.8) %

September 30, 2020 $283,423 $ 870,843



^(1) Organic revenue refers to the positive results of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue component reflects the constant currency impact of (a) the change in revenue of the partner firms which the Company has held throughout each of the comparable periods presented, and (b) "non-GAAP acquisitions (dispositions), net". Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year. See "Non-GAAP Financial Measures" herein. Note: Actuals may not foot due to rounding.

SCHEDULE 3 MDC PARTNERS INC. UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (US$ in 000s, except percentages)

For the Three Months Ended September 30, 2020

Integrated Integrated Media & Networks - Networks - Data All Other Corporate Total Group A Group B Network

Revenue $87,064 $112,159 $33,572 $50,628 $- $283,423



Net income attributable to MDC Partners Inc. $360 common shareholders

Adjustments to reconcile to operating income (loss):

Accretion on and net income allocated to 3,716 convertible preference shares

Net income attributable to the noncontrolling 10,728 interests

Equity in losses of non-consolidated affiliates 31

Income tax expense 1,452

Interest expense and finance charges, net 15,266

Foreign exchange gain (2,159)

Other, net (505)

Operating income (loss) $12,700 $23,636 $2,114 $5,201 $(14,762) $28,889

margin 14.6 %21.1 %6.3 %10.3 % 10.2 %



Adjustments:

Depreciation and amortization $1,601 $4,813 $786 $1,933 $199 $9,332

Impairment and other losses - 157 - 2 - 159

Stock-based compensation 4,024 742 131 141 1,421 6,459

Deferred acquisition consideration adjustments 2,684 250 - (131) - 2,803

Distributions from non-consolidated affiliates^ (1) - - - - 208 208

Other items, net ^(2) - - - - 6,208 6,208

Adjusted EBITDA ^(3) $21,009 $29,598 $3,031 $7,146 $(6,726) $54,058

Adjusted EBITDA margin 24.1 %26.4 %9.0 %14.1 % 19.1 %



^(1) Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses). ^(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts. ^(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein. Note: Effective in the first quarter of 2020, the Company reorganized its management structure resulting in the aggregation of certain Partner Firms into integrated groups ("Networks"). In connection with our discussions with the SEC, the Company has changed the prior presentation for the Networks. Beginning in the second quarter of 2020, the Company separated the Networks into two reportable segments: Integrated Networks - Group A and Integrated Networks - Group B. Prior periods presented have been recast to reflect the change in reportable segments. Note: Actuals may not foot due to rounding.

SCHEDULE 4 MDC PARTNERS INC. UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (US$ in 000s, except percentages)



For the Nine Months Ended September 30, 2020

Integrated Integrated Media & Networks - Networks - Data All Other Corporate Total Group A Group B Network

Revenue $260,420 $323,264 $103,181 $183,978 $- $870,843



Net loss attributable to MDC Partners Inc. common $(6,042) shareholders

Adjustments to reconcile to operating income (loss):

Accretion on convertible preference shares 10,528

Net income attributable to the noncontrolling 14,620 interests

Equity in losses of non-consolidated affiliates 829

Income tax expense 7,029

Interest expense and finance charges, net 46,819

Foreign exchange loss 7,256

Other, net (22,723)

Operating income (loss) $39,337 $33,080 $2,777 $18,045 $(34,923) $58,316

margin 15.1 %10.2 %2.7 %9.8 % 6.7 %



Adjustments:

Depreciation and amortization $4,908 $13,726 $2,401 $5,735 $667 $27,437

Impairment and other losses - 17,786 35 209 1,129 19,159

Stock-based compensation 5,880 2,388 122 339 1,839 10,568

Deferred acquisition consideration adjustments 4,391 (3,859) 375 (392) - 515

Distributions from non-consolidated affiliates ^(1) - - - - 1,273 1,273

Other items, net ^(2) - - - - 12,519 12,519

Adjusted EBITDA ^(3) $54,516 $63,121 $5,710 $23,936 $(17,496) $129,787

Adjusted EBITDA margin 20.9 %19.5 %5.5 %13.0 % 14.9 %



^(1) Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses). ^(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts. ^(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based c ompensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein. Note: Actuals may not foot due to rounding.

SCHEDULE 5 MDC PARTNERS INC. UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (US$ in 000s, except percentages)



For the Three Months Ended September 30, 2019

Integrated Integrated Media & Networks - Networks - Data All Other Corporate Total Group A Group B Network

Revenue $99,299 $129,057 $36,235 $78,316 $- $342,907



Net loss attributable to MDC Partners Inc. common $(5,058) shareholders

Adjustments to reconcile to operating income (loss):

Accretion on convertible preference shares 3,306

Net income attributable to the noncontrolling 7,265 interests

Equity in earnings of non-consolidated affiliates (63)

Income tax expense 3,457

Interest expense and finance charges, net 16,110

Foreign exchange loss 3,973

Other, net 431

Operating income (loss) $17,441 $15,488 $331 $5,272 $(9,111) $29,421

margin 17.6 %12.0 %0.9 %6.7 % 8.6 %



Adjustments:

Depreciation and amortization $2,132 $3,872 $1,004 $2,168 $192 $9,368

Impairment and other losses - 1,933 - 11 - 1,944

Stock-based compensation 4,330 740 16 107 833 6,026

Deferred acquisition consideration adjustments 71 206 3 1,663 - 1,943

Distributions from non-consolidated affiliates ^(1) - (250) - - 48 (202)

Other items, net ^(2) - - - - 705 705

Adjusted EBITDA^ (3) $23,974 $21,989 $1,354 $9,221 $(7,333) $49,205

Adjusted EBITDA margin 24.1 %17.0 %3.7 %11.8 % 14.3 %



^(1) Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses). ^(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts. ^(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein. Note: Actuals may not foot due to rounding.

SCHEDULE 6 MDC PARTNERS INC. UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (US$ in 000s, except percentages)



For the Nine Months Ended September 30, 2019

Integrated Integrated Media & Networks - Networks - Data All Other Corporate Total Group A Group B Network

Revenue $276,286 $395,622 $118,923 $242,997 $- $1,033,828



Net loss attributable to MDC Partners Inc. common $(6,506) shareholders

Adjustments to reconcile to operating income (loss):

Accretion on convertible preference shares 8,931

Net income attributable to the noncontrolling 10,737 interests

Equity in earnings of non-consolidated affiliates (352)

Income tax expense 6,292

Interest expense and finance charges, net 49,284

Foreign exchange gain (4,401)

Other, net 4,559

Operating income (loss) $28,553 $52,189 $(1,041) $19,408 $(30,565) $68,544

margin 10.3 %13.2 %(0.9) %8.0 % 6.6 %



Adjustments:

Depreciation and amortization $6,420 $11,964 $3,332 $6,523 $630 $28,869

Impairment and other losses - 1,933 - 11 - 1,944

Stock-based compensation 8,564 3,231 22 363 452 12,632

Deferred acquisition consideration adjustments (409) (3,950) 75 657 - (3,627)

Distributions from non-consolidated affiliates ^(1) - (250) - - 79 (171)

Other items, net ^(2) - - - - 8,926 8,926

Adjusted EBITDA ^(3) $43,128 $65,117 $2,388 $26,962 $(20,478) $117,117

Adjusted EBITDA margin 15.6 %16.5 %2.0 %11.1 % 11.3 %



^(1) Distributions from non-consolidated affiliates includes (i) cash received for profit distributions from non-consolidated affiliates, and (ii) consideration from the sale of ownership interests in non-consolidated affiliates less contributions to date plus undistributed earnings (losses). ^(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts. ^(3) Adjusted EBITDA is a non-GAAP financial measure, and as shown above it represents operating income (loss) plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, distributions from non-consolidated affiliates, impairment and other items. See "Non-GAAP Financial Measures" herein. Note: Actuals may not foot due to rounding.

SCHEDULE 7 MDC PARTNERS INC. UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO COVENANT EBITDA (US$ in 000s)



2019 2020 Covenant EBITDA (LTM) ^(1)

Q2-2020- Q3-2020 - Q3 Q4 Q1 Q2 Q3 LTM LTM

Net income (loss) attributable to MDC Partners Inc. $(5,058) $(10,488) $(2,437) $(4,102) $360 $(22,085) $(16,667) common shareholders

Adjustments to reconcile to operating income:

Accretion on and net income allocated to convertible 3,306 3,373 3,440 3,509 3,716 13,628 14,038 preference shares

Net income attributable to the noncontrolling 7,265 5,419 791 3,101 10,728 16,576 20,039 interests

Equity in losses (earnings) of non-consolidated (63) - - 798 31 735 829 affiliates

Income tax expense (benefit) 3,457 4,241 13,500 (7,923) 1,452 13,275 11,270

Interest expense and finance charges, net 16,110 15,658 15,612 15,941 15,266 63,321 62,477

Foreign exchange loss (gain) 3,973 (4,349) 14,757 (5,342) (2,159) 9,039 2,907

Other, net 431 (2,158) (16,334) (5,884) (505) (23,945) (24,881)

Operating income $29,421 $11,696 $29,329 $98 $28,889 $70,544 $70,012



Adjustments to reconcile to Adjusted EBITDA:

Depreciation and amortization $9,368 $9,460 $9,206 $8,899 $9,332 $36,933 $36,897

Impairment and other losses 1,944 5,875 161 18,839 159 26,819 25,034

Stock-based compensation 6,026 18,408 3,070 1,039 6,459 28,543 28,976

Deferred acquisition consideration adjustments 1,943 9,030 (4,600) 2,312 2,803 8,685 9,545

Distributions from non-consolidated affiliates (202) 2,219 (14) 1,079 208 3,082 3,492

Other items, net ^(2) 705 349 2,416 3,895 6,208 7,365 12,868

Adjusted EBITDA $49,205 $57,037 $39,568 $36,161 $54,058 $181,971 $186,824



Adjustments to reconcile to Covenant EBITDA:

Proforma dispositions ^(3) $(996) $(1,294) $(124) $- $- $(2,414) $(1,418)

Severance due to eliminated positions 1,956 3,221 2,133 5,233 2,336 12,543 12,923

Other adjustments, net^ (4) 228 368 357 207 77 1,160 1,009

Covenant adjusted EBITDA $50,393 $59,332 $41,934 $41,601 $56,471 $193,260 $199,338



^(1) Covenant EBITDA is a measure that includes pro forma adjustments for acquisitions, one-time charges, permitted dispositions and other adjustments, as defined in the Company's Credit Agreement. Covenant EBITDA is calculated as the aggregate of operating results for the rolling last twelve months (LTM). Each quarter is presented to provide the information utilized to calculate Covenant EBITDA. Historical Covenant EBITDA may be re-casted in the current period for any proforma adjustments related to acquisitions and/or dispositions in the current period. See "Non-GAAP Financial Measures" herein. ^(2) Other items, net includes items such as severance expense and other restructuring expenses. See Schedule 10 for a reconciliation of amounts. ^(3) Represents Kingsdale and Sloane EBITDA for the respective period. ^(4) Other adjustments, net primarily includes one-time professional fees and costs associated with real estate consolidation. Note: Actuals may not foot due to rounding.

SCHEDULE 8 MDC PARTNERS INC. UNAUDITED CONSOLIDATED BALANCE SHEETS (US$ in 000s)



September 30,December 31, 2020 2019



ASSETS

Current Assets:

Cash and cash equivalents $37,075 $106,933

Accounts receivable, less allowance for doubtful accounts of $3,703 and $3,304 403,636 449,288

Expenditures billable to clients 21,884 30,133

Other current assets 67,585 35,613

Total Current Assets 530,180 621,967

Fixed assets, at cost, less accumulated depreciation of $138,859 and $129,579 87,908 81,054

Right of use assets - operating leases 227,362 223,622

Goodwill 710,013 731,691

Other intangible assets, net 46,600 54,893

Deferred tax assets 82,576 84,900

Other assets 21,493 30,179

Total Assets $1,706,132 $1,828,306

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' DEFICIT

Current Liabilities:

Accounts payable $128,643 $200,148

Accruals and other liabilities 323,414 353,575

Advance billings 157,101 171,742

Current portion of lease liabilities - operating leases 40,038 48,659

Current portion of deferred acquisition consideration 39,321 45,521

Total Current Liabilities 688,517 819,645

Long-term debt 860,422 887,630

Long-term portion of deferred acquisition consideration 6,824 29,699

Long-term lease liabilities - operating leases 257,107 219,163

Other liabilities 38,439 25,771

Total Liabilities 1,851,309 1,981,908

Redeemable Noncontrolling Interests 25,172 36,973

Commitments, Contingencies, and Guarantees

Shareholders' Deficit:

Convertible preference shares, 145,000 authorized, issued and outstanding at September 30, 2020 152,746 152,746 and December 31, 2019

Common stock and other paid-in capital 106,037 101,469

Accumulated deficit (476,293) (480,779)

Accumulated other comprehensive loss (income) 6,768 (4,269)

MDC Partners Inc. Shareholders' Deficit (210,742) (230,833)

Noncontrolling interests 40,393 40,258

Total Shareholders' Deficit (170,349) (190,575)

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' $1,706,132 $1,828,306Deficit

SCHEDULE 9 MDC PARTNERS INC. UNAUDITED SUMMARY CASH FLOW DATA (US$ in 000s)



Nine Months Ended September 30,

2020 2019

Net cash used in operating activities $(2,491) $(5,840)

Net cash provided by investing activities 4,549 3,307

Net cash used in financing activities (71,969) (2,202)

Effect of exchange rate changes on cash, cash equivalents, and cash held in 53 8 trusts

Net decrease in cash, cash equivalents, and cash held in trusts including cash $(69,858) $(4,727) classified within assets held for sale

Change in cash and cash equivalents held in trusts classified within held for - (3,307) sale

Change in cash and cash equivalents classified within assets held for sale - 4,441

Net decrease in cash and cash equivalents (69,858) (3,593)

Cash and cash equivalents at beginning of period 106,933 30,873

Cash and cash equivalents at end of period $37,075 $27,280

Supplemental disclosures:

Cash income taxes paid $2,700 $3,631

Cash interest paid $29,311 $32,525



Note: Actuals may not foot due to rounding.

SCHEDULE 10 MDC PARTNERS INC. UNAUDITED RECONCILIATION OF COMPONENTS OF NON-GAAP MEASURES (US$ in 000s)



2019 2020

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD

NON-GAAP ACQUISITIONS (DISPOSITIONS), NET

GAAP revenue from current year acquisitions $- $698 $1,347 $1,396 $3,441 $- $- $- $ -

GAAP revenue from prior year acquisitions ^(1) 15,685 1,519 1,109 291 18,604 - - - -

Foreign exchange impact - - 470 (246) 224 (248) - - (248)

Contribution to organic revenue (growth) (4,008) (440) (2,185) (1,694) (8,327) (411) - - (411) decline^ (2)

Prior year revenue from dispositions ^(3) (1,825) (5,995) (3,178) (4,505) (15,503) (5,024) (4,106) (4,076) (13,206)

Non-GAAP acquisitions (dispositions), net $9,852 $(4,218) $(2,437) $(4,758) $(1,561) $(5,683) $(4,106) $(4,076) $ (13,865)



2019 2020

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD

OTHER ITEMS, NET

Severance and other restructuring expenses $- $6,703 $705 $- $7,408 $1,334 $2,969 $3,270 $ 7,573

Strategic review process costs 1,626 (109) - 349 1,866 1,082 926 2,938 4,946

Total other items, net $1,626 $6,594 $705 $349 $9,274 $2,416 $3,895 $6,208 $ 12,519



2019 2020

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD

CASH INTEREST, NET & OTHER

Cash interest paid $(1,629) $(30,014) $(882) $(29,698) $(62,223) $(145) $(28,591) (575) $ (29,311)

Bond interest accrual adjustment (14,625) 14,625 (14,625) 14,625 - (14,625) 13,894 (14,035) (14,766)

Adjusted cash interest paid (16,254) (15,389) (15,507) (15,073) (62,223) (14,770) (14,697) (14,610) (44,077)

Interest income 149 138 165 162 614 114 190 114 418

Total cash interest, net & other $(16,105) $(15,251) $(15,342) $(14,911) $(61,609) $(14,656) $(14,507) $(14,496) $ (43,659)



2019 2020

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD

CAPITAL EXPENDITURES, NET

Capital expenditures $(3,606) $(4,317) $(5,863) $(4,810) $(18,596) $(1,546) $(2,144) $(24,187) $ (27,877)



2019 2020

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 YTD

MISCELLANEOUS OTHER DISCLOSURES

Net income attributable to the noncontrolling $429 $3,043 $7,265 $5,419 $16,156 $791 $3,101 $10,728 $ 14,620 interests

Cash taxes $1,677 $1,817 $137 $(1,335) $2,296 $849 $1,717 $134 $ 2,700



^(1) GAAP revenue from prior year acquisitions for 2020 and 2019 relates to acquisitions which occurred in 2019 and 2018, respectively. ^(2) Contribution to organic revenue represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that are included in the Company's organic revenue growth (decline) calculation. ^(3) Prior year revenue from dispositions reflects the incremental impact on revenue for the comparable period after the Company's disposition of such disposed business, plus revenue from each business disposed of by the Company in the previous year through the twelve month anniversary of the disposition. Note: Actuals may not foot due to rounding.

CONTACT:Erica Bartsch

Sloane & Company

212-446-1875

IR@mdc-partners.com

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SOURCE MDC Partners Inc.